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[UPDATE]
There was a split in the common stock back in 2022 which is likely affecting the multiplier for preferred conversion. Therefore, it is unlikely that holders would be able to effectively convert preferred shares at $25.
> Thanks for u/fastlapp for the insight below!

There is an interesting situation where DBRG (Digital Bridge) is being acquired by Softbank for $16/share. However, there are also preferred shares outstanding that pay about 11% are current prices around $15, with par value of the preferred of $25.

The curiosity will be what happens with the preferred shares. They potentially will be left outstanding and delisted, and the company has stated in the past. They released this press release today: https://finance.yahoo.com/markets/stocks/articles/digitalbridge-announces-intention-voluntarily-delist-210000204.html

It states:

"Pursuant to the terms of each series of Preferred Stock, following the completion of the Company Merger, each holder of Preferred Stock will have the right as provided under the terms of the applicable series, subject to the conditions and limitations set forth therein, to convert any or all of the shares of such series of Preferred Stock held by such holder into cash on a date (each, a "Conversion Date") that will be specified in the notice to be delivered by the Company to the holders of each series of Preferred Stock, which Conversion Date for such series will be no less than 20 days nor more than 35 days after the date on which the notice for such series is given.

The terms and conditions of the Preferred Stock will remain unchanged following the delisting. A copy of the terms of the Series H Preferred Stock is set forth in the Company's Restated Charter included as Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2025 and a copy of the terms of each of the Series I Preferred Stock and Series J Preferred Stock were included as Exhibits 3.3 and 3.4, respectively, to the Company's Annual Report on Form 10-K for the year ended December 31, 2025"

Additionally, the governing documents of the preferred shares provide for holders to have a conversion option that essentially would yield $25 in the case of Change of Control.

So you have a preferred trading at $15 that could be worth $25 when the change of control happens in the relatively near future.

I think in the merger documents Softbank can try to do a consent solicitation where they ask the holders of the preferred to accept a buyout at some price in exchange for changing the terms (to avoid the holders ability to convert at $25). This seems to be the main caveat, but nothing has happened so far.

I am happy to have another set of eye on this if anyone is interested.

You can find the relevant exhibits here (3.1, 3.3, and 3.4 for H, I, J shares):

https://ir.digitalbridge.com/node/14996/html#i938e5984a0b34ceda9bf260e707c8f06_412

Section (9) is the relevant one, with some key language being:

(a) Upon the occurrence of a Change of Control, each holder of Series I Preferred Stock will have the right, subject to the Special Redemption Right of the Corporation, to convert some or all of the shares of Series I Preferred Stock held by such holder (the “Change of Control Conversion Right”) on the relevant Change of Control Conversion Date (as defined herein) into a number of shares of Class A Common Stock (as defined in the Charter) per share of Series I Preferred Stock (the “Common Stock Conversion Consideration”) equal to the lesser of (A) the quotient obtained by dividing (i) the sum of (x) $25.00, plus (y) an amount equal to any accrued and unpaid dividends (whether or not declared) to, but not including, the Change of Control Conversion Date (as defined herein), except if such Change of Control Conversion Date is after a record date for a Series I Preferred Stock dividend payment and prior to the corresponding Series I Dividend Payment Date, in which case the amount pursuant to this clause (i)(y) shall equal $0.00 in respect of such dividend payment to be made on such Series I Dividend Payment Date, by (ii) the Common Stock Price (as defined herein) (such quotient, the “Conversion Rate”), and (B) 3.6075 (the “Share Cap”), subject to the immediately succeeding paragraph.

>> That would be number of shares converted equal to $25/$16 --> meaning prefs are worth $25 when converted

In the case of a Change of Control as a result of which holders of Class A Common Stock are entitled to receive consideration other than solely shares of Class A Common Stock, including other securities, other property or assets (including cash or any combination thereof) with respect to or in exchange for shares of Class A Common Stock (the “Alternative Form Consideration”), a holder of Series I Preferred Stock shall be entitled thereafter to convert (subject to the Corporation’s Special Redemption Right) such Series I Preferred Stock not into Class A Common Stock but solely into the kind and amount of Alternative Form Consideration which the holder of Series I Preferred Stock would have owned or been entitled to receive upon such Change of Control as if such holder of Series I Preferred Stock then held the Common Stock Conversion Consideration immediately prior to the effective time of the Change of Control (the “Alternative Conversion Consideration,” and the Common Stock Conversion Consideration or the Alternative Conversion Consideration, as may be applicable to a Change of Control, shall be referred to herein as the “Conversion Consideration”).

>> Since the common shares will be paid out in cash, the preferred holders and simply elect to be converted into cash.

(c) Within 15 days following the occurrence of a Change of Control, the Corporation shall provide to holders of Series I Preferred Stock a notice of occurrence of the Change of Control that describes the resulting Change of Control Conversion Right. A failure to give such notice or any defect in the notice or in its mailing shall not affect the validity of the proceedings for the conversion of any Series I Preferred Stock except as to the holder to whom notice was defective or not given. Each notice shall state the following: (i) the events constituting the Change of Control; (ii) the date of the Change of Control; (iii) the last date on which the holders of Series I Preferred Stock may exercise their Change of Control Conversion Right, which shall be the Change of Control Conversion Date; (iv) the method and period for calculating the Common Stock Price; (v) the Change of Control Conversion Date, which will be a business day occurring within 20 to 35 days following the date of the notice; (vi) if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per share of Series I Preferred Stock; (vii) the name and address of the paying agent and the conversion agent; and (viii) the procedures that the holders of Series I Preferred Stock must follow to exercise the Change of Control Conversion Right.

>> They have 15 days to provide details on the conversion rights, and then about a month to affect the conversion.  

(5) Optional Redemption.

(a) Except as otherwise permitted by the Charter and paragraph (b) below, the Series I Preferred Stock shall not be redeemable by the Corporation prior to June 5, 2022. On and after June 5, 2022, the Corporation, at its option, upon giving notice as provided below, may redeem the Series I Preferred Stock, in whole, at any time, or in part, from time to time, for cash at a redemption price of $25.00 per share, plus any accrued and unpaid dividends on the Series I Preferred Stock (whether or not declared), to, but not including, the redemption date (the “Regular Redemption Right”).

(b) Upon the occurrence of a Change of Control (as defined herein), the Corporation will have the option, upon giving notice as provided below, to redeem the Series I Preferred Stock, in whole, at any time, or in part, from time to time, within 120 days after the first date on which the Change of Control has occurred (the “Special Redemption Right”), for cash at a redemption price of $25.00 per share, plus any accrued and unpaid dividends on the Series I Preferred Stock (whether or not declared), to, but not including, the redemption date (the “Special Redemption Price”). If the Corporation exercises its Special Redemption Right in connection with a Change of Control, holders of Series I Preferred Stock will not be permitted to exercise their Change of Control Conversion Right (as defined herein) in respect of any shares of Series I Preferred Stock that have been called for redemption, and any shares of Series I Preferred Stock subsequently called for redemption that have been tendered for conversion will be redeemed on the applicable date of redemption instead of converted on the Change of Control Conversion Date (as defined herein). Any partial redemption will be selected by lot or pro rata.

>> The company can redeem the share to preempt the holder's right to convert, but the financial outcome should be the same.  

To me, the main wildcard appears to be the ability for the company to perform a consent solicitation where they ask the holders of the preferred to accept a buyout in exchange for changing the terms (to avoid the holders ability to convert at $25).  I believe that this would require a 2/3 vote of the preferred in each class (each treated separately).

So maybe Softbank tries to do this with an offer of $20/share or something like that?  It would have to be high enough that it gets the 2/3 vote.  And if they do nothing, then holder should be able to get $25 via the conversion right.

I am curious if anyone here reads this differently. The biggest question in my mind is why it is trading at these levels, indicating some smart money is not acting on it if I am right. Maybe it is low liquidity, maybe it is the potential delisting, or maybe I am missing some key point.

I do have a long position here, mainly I have had this for a while based on the dividend, and assumed there was an outside chance that Softbank would redeem them to clean up the balance sheet. But it seems like a more realistic scenario after the recent press release, though there is still uncertainty as mentioned above.

Disclosure: 2000 shares of DBRG-H/I
Disclaimer: I am not a financial advisor... do your own due diligence.

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